Peak Tesla?

This article first appeared in National Review.

Investors are finally beginning to hit the brakes on the sky-high electric-vehicle stock.

In the end, the needles that likely pricked the bubble were those used to inoculate millions of Americans starting last November. For the stock market, there was before November 9, the date of Pfizer’s vaccine announcement, and after November 9. The news that vaccines developed by Pfizer and Moderna were safe and effective fired a shot signaling that the pandemic would soon be controlled and that the economy would return to normal before long.

The market rotation since then has been rapid, with former leaders stalling or losing ground and former laggards recovering rapidly. Since that November date, the FAANG (Facebook, Amazon, Apple, Netflix and Google) stocks that led the way in 2020 have averaged a return of 3.1 percent, gaining mainly thanks to Google, which was up 15.7 percent (the FAAN without Google averaged a negative 0.1 percent return). Microsoft did better, up 5.5 percent. Zoom Communications and Peloton Interactive, the 2020 icons of work at home and exercise at home, were down 34.3 percent and 12.7 percent respectively. (Returns are as of the March 22 close.)

On the other side of the tracks, the old and unsexy names, which fell in March 2020 and could not sustain a decent recovery through the remainder of the year, have all soared. Since November, “ok boomer” companies Exxon and Valero are up 70.6 percent and 89.4 percent; Carnival Cruise, Delta Airlines, and Marriott International are up 98.8 percent, 52.7 percent, and 45.8 percent; Gap, Darden Restaurants, and Ulta Beauty are up 40.9 percent, 33.9 percent, and 46.5 percent.

But then there was Tesla. Tesla, the maker of fortunes and dreams. Tesla, the rocket, the star, the supernova. Continue Reading >>>

Wednesday Briefs – 20 January 2021

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This week: President Biden; Trump’s Federal Judges; Foreign Policy Returns; Market Love.

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Ron Swanson is Smiling

This article first appeared at National Review.

Ron Swanson is having a good year.

The smug anti-social meat-and-potatoes libertarian protagonist in the NBC series Parks and Recreation prides himself on being a do-nothing saboteur in his Pawnee (a fictional town in Indiana) municipal job and also, among other things, on having stashed away untold amounts of gold bullion, buried in various locations for doomsday or perhaps just for a rainy day.

While his sophisticated counterparts in Indianapolis or (gasp) far away New York City fret over their carefully constructed portfolios of securities, mutual funds, hedge funds, and the rest, Swanson’s own investment shines, like him, in its straight, plain and idle simplicity. This year, it also shines from having outperformed most assets, with the price of gold logging a 29 percent rise since January compared with a humble 1 percent for the S&P 500 stock index and 20 percent for a Nasdaq that is driven by only a handful of names.

After a long decline in the 1980s and 1990s, gold began its rehabilitation on the eve of the new millennium. Had Swanson caught the gold bug in July 1999, when gold made a historic bottom at $252.8, he would have gained 677 percent from his investment, a performance that towers over the major stock indices.

Entire careers have been made in the stock market over that twenty-one year span, with billions of dollars flowing into the pockets of bankers and investment managers, and into their six-figure cars, seven-figure Hampton homes, and eight-figure private jets.

Screen Shot 2020-08-03 at 8.42.24 AM

Yet, none of these financiers’ portfolios has measured up to gold. The dumb barbaric yellow relic has trounced all of them over nearly every interval since 1999, as can be seen in the table above. The one exception to this public thrashing is the ten-year period since 2010 in which gold has underperformed only because it spiked in 2010-11, much as it is currently. Read more

Elon Musk’s Tesla Rocket

This article is published at National Review.

What it will take for Tesla’s stunning rise to end with a successful landing.

“Wow, Elon Musk!”

That was the cathartic cheer and cry of relief in millions of American homes on May 30, after two months of forced confinement, when the SpaceX Falcon 9 rocket and Dragon Capsule lifted off from Cape Canaveral carrying two American astronauts bound for the International Space Station. It was the first ever manned SpaceX mission and the first time since 2011 that an American-made rocket had taken Americans into space. SpaceX is of course one of Elon Musk’s companies.

bangabandhu_satellite-1_mission_284202549897229As if on cue on the very next day, Musk’s other monster rocket, Tesla stock, blasted off again and shot out of its range, adding nearly 8 percent to reach $898.10, a level that was more than double its March low of $361.20. Days later, the boosters fired again and lifted the stock above $1,000 and then once more, after a two-week pause, to $1,500, where it is now taking a brief respite in the orbit of companies valued at $300 billion.

There in the stratosphere, the stillness of space envelops the investor as it does the astronaut. Escape velocity has been achieved for shareholders, some with many, many millions in profits, leaving the earthbound shorts (people who bet against the stock) but a small and distant memory to be mockingly blotted out of view.

These shorts, hopelessly weighed down by what’s left of traditional investment discipline, have (so far) lost a cumulative $18 billion in vain expectation that the Tesla rocket would reverse, crash, and burn. All they can do now is stare at their screens and argue to whomever will still listen that this stock rocket will eventually come back to Earth.

Not necessarily. Consider Amazon, Apple, Microsoft, launched long ago and now heading deeper and deeper into the trillion dollar galaxy.

The question then is whether Tesla, though much smaller today, can one day join the outer reaches traveled by these companies, or whether it will crash as so many hot stocks have in the past. Tesla bulls are confident that it can maintain its current trajectory, a belief that is owed in no small part to the faith that they have in Elon Musk. Read the rest at National Review.